Working Paper: CEPR ID: DP1786
Authors: Christian Keuschnigg; Wilhelm Kohler
Abstract: We evaluate potential costs and benefits of Eastern enlargement of the EU. In addressing fiscal costs of enlargement in addition to tariff and non-tariff barriers, we arrive at important conclusions: 1) Overall, extending EU membership to Eastern applicants is more than worth its price to Austria. The (dynamic) gains from integration clearly outweigh the budgetary costs. 2) Somewhat surprisingly, the wage spread between skilled and unskilled labour is narrowed rather than widened. 3) Significant sectoral and intergenerational redistribution may nevertheless render EU enlargement difficult on political grounds, with the agricultural sector and the young losing out.
Keywords: European integration; Eastern enlargement; Dynamic trade modelling; Computable general equilibrium
JEL Codes: C68; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EU enlargement (F36) | Austria's economy benefits (B53) |
| dynamic gains from integration (F15) | budgetary costs (H61) |
| EU enlargement (F36) | wage spread between skilled and unskilled labor (J31) |
| EU enlargement (F36) | sectoral and intergenerational redistribution (H23) |
| EU enlargement (F36) | labor-intensive industries favor (J89) |
| EU enlargement (F36) | unexpected positive outcomes for unskilled workers (F66) |